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Early retirement offer advice
Old 01-11-2015, 01:59 PM   #1
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Early retirement offer advice

I am 52 and being offered early retirement by sweetening my pension. Looking for advice on how to draw from accounts if I take it. I have run FIRECalc and it says I will be fine. I have money in my 401K, which is invested in diversified stock mutual funds. I also have an inherited IRA, and a joint account, both of which are invested in mutual funds and bonds.

If I take the retirement as an annuity (I can also take as a lump sum), my pension will not be enough to cover my monthly expenses. I was thinking of this strategy:
- Leave the 401K alone till I reach 59 1/2
- Change the inherited IRA and joint accounts to pay out all interest, dividends and capital gains into a money market for monthly expenses
- Withdraw the rest of what I need for monthly expenses from the joint account. Maybe withdraw 3 years worth of expenses and put in CD's, kind of like a mini "bucket strategy" approach.

Thoughts on this approach? Anyone see any issues with this or perhaps a better way to do things?
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Old 01-11-2015, 02:16 PM   #2
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I'm a big fan of the 3 legged approach - SS, pension/annuity, savings. So I'd keep the retirement pension in the annuity form.

I have a similar situation - and kept my (small) pension in the annuity form... and have the dividends/cap gains paid out as cash in my benificiary IRA - I use those as the source for my distributions. I pull cash from my taxable accounts to make up the difference for my spending.
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Old 01-11-2015, 02:29 PM   #3
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Depending on where you expect your normal marginal tax rate to be, there is no reason not to take money from the inherited IRA and leave the 401k alone. If you take more than you need to live on, you can roll the excess into a Roth.
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Old 01-11-2015, 07:31 PM   #4
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Thanks to you both for your replies and good to hear others are taking the same approach. Any other input?
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Old 01-11-2015, 08:06 PM   #5
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I'm retiring on 1.31.15 @ age 54 and, similar to you, have an early out/buy out offer and plan the following approach: leave my 401K alone a few years and live on my annuity and personal savings. Once my personal savings are down to a certain level (maybe $50K) then I'll start tapping into my 401K.

Good luck in your retirement.


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Old 01-11-2015, 09:03 PM   #6
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Depending on where you expect your normal marginal tax rate to be, there is no reason not to take money from the inherited IRA and leave the 401k alone. If you take more than you need to live on, you can roll the excess into a Roth.
An inherited tIRA cannot be converted to Roth. Withdrawals from an inherited IRA cannot themselves be rolled into one's own Roth IRA. Of course, if you also have earned income at least some of those dollars can be placed into your own IRA.
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Old 02-11-2015, 02:15 PM   #7
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When do mutual funds pay out their capital gains/dividends/interest? Do they all pay out at the same time (beginning/end of year), or does it depend on the individual fund? And can I tell this by looking up my specific funds?
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Old 02-11-2015, 03:38 PM   #8
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When do mutual funds pay out their capital gains/dividends/interest? Do they all pay out at the same time (beginning/end of year), or does it depend on the individual fund? And can I tell this by looking up my specific funds?
Depends on the fund. Many pay monthly (bond funds) or quarterly dividends. Some pay just yearly. Cap gains are usually at year end. Look up each fund on line and look for "distributions". Usually pretty easy to figure when they pay dividends and cap gains.
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Old 02-11-2015, 03:41 PM   #9
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I found it, thanks!
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